Better has spent most of this year lurching from one crisis to the next, and a new financial filing with the U.S. Securities and Exchange Commission sheds light on how bad the past 18 months have been.
It lost nearly $304 million in 2021, a number that doesn’t include the high cost of multiple rounds of layoffs and voluntary buyouts earlier this month, the online mortgage lender turned full-service real estate company revealed Monday in new public documents.
The company unveiled that it had spent up to $84.1 million shedding thousands of employees from its payroll this year, a figure that itself likely doesn’t count the latest round of buyouts and layoffs this month.
The new filing, by the firm that’s been working to take Better public through what’s known as a special purpose acquisition company — or SPAC — merger, sheds new light on the whiplash faced by a company that ballooned in size while riding a wave that crested late last year.
The company has now shed more than half of its workforce, continues losing top talent and says it still may require another funding round to get itself back on track. The future of Better Real Estate remains uncertain.
The filing made clear that, even flying straight into turbulent headwinds, and after a year when the company’s reputation was severely damaged by public relations debacles, Better continues on its quest toward going public.
With so many different changes at the company — including a third mass-layoff this month — it’s worth checking in on where things stand at Better today.
How many people still work for Better?
Riding a wave of feverish buyer demand, record-low interest rates and a rapid shift to online services during the pandemic, Better swelled its workforce to more than 10,000 employees in November 2021.
That would be the peak of the company’s ranks to date.
The company laid off 900 employees in an internationally maligned pre-holiday Zoom call that sent the company into a tailspin of ongoing bad publicity.
And while that represented a reduction in force of 9 percent at the time, there were rumblings that the company’s finances were struggling and that more layoffs were on the way.
A wave of high-ranking staffers began jumping ship, including department leaders.
In early March, the company laid off approximately 3,000 more employees, bringing the total down to 5,800 employees by March 31.
Fifty-six percent of those employees are in the United States, 2,300 are in India and the remaining 200 are in the United Kingdom. The company reported in June 2021, that 40 percent of its workforce was in India, meaning Better has proportionately shed employees across the globe.
Shedding 42 percent of a larger company’s workforce isn’t cheap, and the company reported that it spent between $74.1 million and $84.1 million in “one-time termination benefits” for those impacted.
But that wasn’t the end of the company’s retraction, and employees who weren’t affected by the mass layoffs in March faced more turmoil just around the corner.
Age-based buyouts and another layoff
Earlier this month, Better’s new head of human resources sent an email to employees in an attempt to cut staff.
As part of a voluntary separation offer, Better gave employees younger than 40 a week to leave on their own in exchange for two months’ pay. Those over 40 had three weeks to take the deal.
“The uncertain mortgage market conditions of the last couple of weeks have created an exceedingly challenging operating environment for many companies in our industry,” wrote Richard Benson-Armer, Better’s chief people, performance and culture officer, according to a copy of the email reviewed by Inman.
Rapidly changing market conditions are requiring the industry to cut staff, Benson-Armer wrote.
“Despite ongoing efforts to streamline our operations and ensure a strong path forward for the company, Better is no exception.”
Counting only the reported layoffs, that means Better may have sliced its staff by 57 percent, not counting voluntary buyouts, to around 4,300 employees.
The company declined to say how many employees — and in which age group — took a buyout this month. It also declined to provide details on the layoffs.
As for the future of Better, a representative of the company told Inman the company still plans to go public.
“There are no plans to end Better Real Estate at this time,” the representative said. “The merger is still moving forward.”
Is the company growing or shrinking?
Despite its mounting losses, Better continues to see most aspects of the business grow.
Better Plus, which includes the company’s non-mortgage business line, grew from $39.5 million in 2020 to $133.7 million last year, the company said.
Insurance coverage, homeowners and title, grew from $8.2 billion to $22.2 billion in 2021. Better Real Estate’s transaction volume rose from $694 million in 2020 to $2.2 billion last year.
“We believe we are well-positioned to grow the business, particularly as we lean into purchase, while continuing to leverage our proprietary technology to optimize our customers’ experiences, increase speed, decrease cost, and enhance loan production quality.”
But, it said, after a significant slowdown in the middle of 2021, it may need more money in order to grow. It also forecasts more dark clouds on the horizon.
“Although we recognized net income of $82.3 million in the quarter ended March 31, 2021, we recorded net loss of $303.8 million for the year ended December 31, 2021, and expect that we may incur net losses in proximate future periods due to fluctuations and increases in interest rates and continued investments that we intend to make in our business (including investments to expand product offerings).”
What about Better Real Estate?
When launching its own real estate brokerage in 2021, Better announced its aspirations to expand to all 50 states by the end of this year.
Its first in-house agent was hired in May 2020. By the end of that year, the team was up to seven Better employees working as real estate agents.
By Dec. 31, 2021, 470 agents were licensed in 30 states and the District of Columbia. Better relies on its referral network with other brokers to cover the remaining gap, and it continues to grow its internal network of real estate agents.
This side of the business earned the company $20.6 million last year, yet the future of this arm of the company remains uncertain.
The head of the team, Christian Wallace, voluntarily left earlier this year amid a wave of departures by members of the company’s management team.
The company also acknowledges the difficulty of operating a brokerage with nationwide reach, given the variety of rules and regulations that can change from year to year.
The filing seemed to throw the future of Better Real Estate in question.
“If we are unable to comply with and become liable for violations of these laws or regulations, or if unfavorable regulations or interpretations of existing regulations by courts or regulatory bodies are implemented, we could be directly harmed and forced to implement new measures to reduce our liability exposure.”
That’s largely been boilerplate language in recent SEC filings. A violation in one of its top states shows why.
Just last year, the company was fined $80,000 by the state of Washington for a variety of violations between 2017 and 2019, including using mortgage loan originators who weren’t licensed with the state.
It’s not clear how many Better Real Estate agents were cut during the latest layoffs, and whether it will continue its effort at expansion or focus solely on top-producing states.
If it stripped to down to focus only on the four states that make up nearly half of its funded loan volume, Better would focus on California, Texas, Florida and Washington.
The company has two job postings for Better Real Estate: for designated brokers in California and Oregon.